The Impact of Medical Bills on Your Offer in Compromise
Question: I have a lot of medical bills that I have to pay each month because of a surgery I had several years ago. Will those medical bills help my offer in compromise?
Answer: Yes. Medical bills are one expense that the IRS will allow 100% of what you can prove you actually pay. I have many clients who bring me their “Explanation of Benefits” from the insurance company that shows what their medical bills are, but they are not actually paying those bills. If you are in fact paying those bills, you can claim 100% of those bills in determining what your offer in compromise amount will be.
Why is this different? Because the IRS has national standards that they require you to use for expenses such as food, clothing, housing, and transportation. No matter what you actually spend each month, your expenses in those categories are capped at the IRS standard. For the most part, I have found that my clients spend much more than the IRS standard.
Keep in mind that the medical expenses do not just include doctor or hospital bills. You should remember to claim your pharmacy bills, health insurance premiums, and all other health care related costs. Your pharmacy can provide you with a very detailed print-out that shows exactly which prescriptions you received in the past year and the total amount you actually paid so you can get a nice monthly average cost.
If you are healthy and don’t have any regular medical expenses, take heart, the IRS kindly allows you an automatic, guaranteed $54 per month per person in your household for medical expenses.